Federal Direct Loan

Page address: http://www.mnsu.edu/campushub/loans/federaldirect/

As the cost of higher education increases, more and more students look to Federal Direct Loan(s) to pay their expenses. Minnesota State University, Mankato is committed to making every attempt to keep the cost of attendance manageable for all students. However, even with this commitment to reasonable educational costs, many MSU students must take out student loans to meet their educational expenses.

About the Federal Direct Loan

Federal Direct Loans are administered by the federal government. There are two different types of Federal Direct Loans; Subsidized and Unsubsidized. It is very important to understand the differences between these two.

Interest Rates

As of 7/1/2014, interest rate is 4.66% for Federal Direct Subsidized and Unsubsidized Loans for undergraduate students, and 6.21% for Federal Direct Unsubsidized Loans for graduate and professional students; graduate and professional students are not eligible to receive Direct Subsidized Loans.

Grace Period

There is a six-month grace period on both the Subsidized and Unsubsidized Federal Direct Loans. The grace period is the first six months after a student has dropped below 1/2 time enrollment, graduates or withdraws from higher education. During the grace period, students are not required to repay their Subsidized Federal Direct Loan, but they are encouraged to continue interest payments on their Unsubsidized Federal Direct Loan. Once the six-month grace period has expired, the student begins repayment on both the Subsidized and Unsubsidized Federal Direct Loans.

Paying Back Your Loan

Federal Direct Loans play an important role in Federal Student Aid programs. Federal Direct Loans are NOT free money. You are responsible for paying all of your loans back in full, plus interest. You must pay back your student loans even if you do not complete your education, if you are unable to gain suitable employment, or if you are unsatisfied with your education. If you move, change your name, change your telephone number, change schools, drop below 1/2 time, or if you are unable to make your loan payment due to financial hardship, you MUST contact the Department of Education Servicer.

Repayment on a Federal Direct Loan begins 6 months after you graduate, drop below 1/2 time, or leave school. Your minimum monthly repayment is normally $50.00, but it could be more depending on how much you borrowed. You may make interest and principal payments at any time. Students are encouraged to make their interest payments on their Unsubsidized Federal Direct Loans while they are in school. There is no penalty for making prepayments on your Federal Direct Loan(s).

Maximum Annual and Aggregate Limits

There are maximum annual and aggregate limits on Federal Direct Loans. The annual maximums are based on grade classification and dependent/independent status.

Dependent Students

Grade Classification

Annual Limit

Aggregate Limit

Freshman

$ 5,500 (subsidized may not exceed $3,500)

$ 31,000 (subsidized may not exceed $23,000)

Sophomore

$ 6,500 (subsidized may not exceed $4,500)

$ 31,000 (subsidized may not exceed $23,000)

Junior & Senior

$ 7,500 (subsidized may not exceed $5,500)

$ 31,000 (subsidized may not exceed $23,000)

Independent Students

Grade Classification

Annual Limit

Aggregate Limit

Freshman

$ 9,500 (subsidized may not exceed $3,500)

$ 57,500 (subsidized may not exceed $23,000)

Sophomore

$ 10,500 (subsidized may not exceed $4,500)

$ 57,500 (subsidized may not exceed $23,000)

Junior & Senior

$ 12,500 (subsidized may not exceed $5,500)

$ 57,500 (subsidized may not exceed $23,000)

Graduate

$ 20,500 (unsubsidized only as of July 1, 2012)

$ 138,500 (subsidized may not exceed $65,500)

Awards

Individual awards are also limited to the student's eligibility and cost of attendance.

Budgeting for Your Loan

Before taking on the responsibility of Federal Direct Loan indebtedness, students first need to determine how much loan funding they need for the academic year. Budgeting for the academic years is a wise move for all students, but it is imperative for students taking out Federal Direct Loans. Borrow only the amount of loan funding that you need to meet your expenses.

Take time to determine the amount of loan funding you will need to meet your expenses while in school. Using the monthly budget sheet, fill in the blanks with how much you anticipate you will spend in each of the categories. Remember, spending should be kept to a minimum. Add up your expenses, then subtract any other financial aid you have been awarded to determine how much loan money you will need to meet your expenses.

Not only is it important for students to budget for the academic year, but it is also important for students to anticipate how borrowing Federal Stafford loans will impact their future budgets. The Subsidized Federal Direct Loan charges no interest to the student while in school. For some students, it is difficult to realize how much they are borrowing or how it will impact their future budget until after graduation, because they have not had to make monthly payments while in school.

Entrance Loan Counseling

Federal regulations require all first-time borrowers of a Federal Direct Loan at Minnesota State University, Mankato complete Federal Direct Loan Entrance Counseling. Loan Counseling must be completed BEFORE a student can be disbursed their Federal Direct Loan funding.

Students may complete the Federal Direct Loan Counseling Online. On-line Entrance Counseling contains a testing component. Students must successfully complete the testing component in order to complete the counseling session. After you have successfully completed the on-line counseling your information will be forwarded to MSU.